PETITIONER:
BHOLA NATH MUKHERJEE & ORS.
Vs.
RESPONDENT:
GOVT. OF WEST BENGAL & ORS.
DATE OF JUDGMENT: 22/11/1996
BENCH:
J.S. VERMA, SUHAS C. SEN.
ACT
HEADNOTE
JUDGMENT
WITH
CIVIL APPEAL NO. 10220 OF 1992
JUDGMENT
SEN. J.
Asansol Electricity Supply Co. Ltd. (hereinafter described as ‘the Company’) was a licensee under the Indian Electricity Act, 1910 and was engaged in the business of generation and distribution of electricity. On 5th April, 1979 West Bengal Government, in exercise of its powers under Section 4(1) of the Indian Electricity Act, 1910 (hereinafter described as ‘the Act’), revoked the license of the Company and directed the Company to sell the undertaking to the West Bengal State Electricity Board (hereinafter described as ‘the Board’) on 16th April, 1979. Pursuant to the said order, the Deputy Chief Engineer (Commercial) took over the said undertaking on behalf of the Board on 16th April, 1979. The employees of the Company were allowed to continue in the service of the Board.
After an interval of about twenty days, on 5th May, 1979 the Board asked the employees to execute a form containing fresh terms and conditions of service which, according to the employees, amounted to fresh appointments under the Board. Such appointments were to be temporary and/or provisional appointments, initially for period of three months. The further continuance of the writ petitioners in the service of the Board was to depend on their suitability for appointment under the Board. It was further stipulated that the employees would not be entitled to the benefit of their past service under the Company. For all practical purposes, the employees were to be treated as fresh appointees on and from 16th April, 1979, that is, from the date of take over of the undertaking by the Board.
The employees challenged the decision of the Board to treat the employees as fresh appointees by a write petition to the High Court. By a judgment and order dated 12th April, 1988 Justice Ajit Kumar Sengupta held that the employees were entitled to continue in their service despite the change in ownership of the undertaking. The employees could not be deprived of the benefits which they had been enjoying before the undertaking was taken over by the Board. The writ petition was disposed of giving, inter alia, the following direction:-
"(a) The respondents shall treat
the petitioners to be in continuous
service for the purpose of
assigning seniority with effect
form 16th April, 1979.
(b) The basic pay of the
petitioners and other admissible
allowances shall be fixed taking
into account the total length of
service under the erstwhile Company
as well as under the Board.
(c) Certified Standing Order of the
erstwhile Company shall remain in
force so far as the petitioners are
concerned.
(d) Amount of gratuity shall be
calculated for the petitioners who
have already retired or would be
retiring taking into account their
entire period of service i.e. from
the date of initial appointment
under the Company.
(e) If any of the petitioners was
entitled to bonus for the period
1978-79 such bonus shall be awarded
to the petitioners.
(f) Retrenchment benefit shall be
given to the petitioners as
admissible if the petitioner are
treated as retrenched.
(g) The respondents shall pay the
petitioners the arrears of pay and
allowances after fixation of pay
and allowances taking into account
their entire service period."
Sengupta, J., however, directed
that this order would not be
treated as a precedent.
The Board preferred an appeal against the decision of Sengupta, J. The Appeal Court allowed the appeal and held that there could be no continuity of service after the taking over of the management. The services of the employees were terminated by operation of Section 25FF of the Industrial Disputes Act, 1947.
The Appeal Court, however, directed that the employees were entitled to retrenchment compensation in accordance with the provisions of Section 25FF of the Industrial Disputes Act, 1947. The Board was directed to pay such compensation to the employees within a period of eight weeks from the date of communication of the order passed by the Court. Aggrieved by the said order of the High Court, the Board as well as the employees have come up in appeal before this Court.
So far as the Board is concerned, it is their case that the Company had gone into liquidation and the Board had paid to the Official Liquidator Rs.54,50,350/-, Rs.8,00,000/- and Rs.46,50,350/- during the period 1.9.83 to 6.5.88. According to the Board, the burden of payment of amount of compensation under Section 25FF of the Industrial Disputes Act, 1947 will be on the Company. The purchase price paid by the Board was more than adequate for making full payment of compensation to the employees. The Board had given fresh employment to the employees after taking over of the undertaking and, thereafter, has been regularly paying salaries and other benefits to the employees from the date of their appointment under the Board. Neither in fact nor in law, the employees could be treated as in continuous service in spite of the change in management.
In our view, the contention of the Board must be upheld in the facts of this case.
Under Section 3 of the Indian Electricity Act, 1910, the State Government may grant licence to any person to supply energy in a specified area. Such licence can be revoked under Section 4 in public interest in certain specified cases. Clause (c) of subsection (1) of Section 5 enables the State Government, after revocation of licence under Section 4, to require the licensee to sell the undertaking to the State Electricity Board, if the State Electricity Board is willing to purchase the undertaking. Section 7 provides that where an undertaking is sold under Section 5 or Section 6, then upon the completion of the sale or on the date on which the undertaking is delivered to the purchaser, the undertaking shall vest in the purchaser free from any debt, mortgage or similar obligation of the licensee or attaching to the undertaking. There is a provision to sub-section (i) of Section 7 which lays down that "any such debt, mortgage or similar obligation shall attach to the purchase money in substitution for the undertaking". Likewise, under sub-section (ii) the rights, powers, authorities, duties and obligations of the licensee under his licence shall stand transferred to the purchaser and such purchaser shall be deemed to be the licensee. Section 7A deals with determination of purchase price. Section 7B was inserted by West Bengal Act 39 of 1984 to safeguard the interest of the employee of an undertaking which is being sold. Section 7B lays down:-
"7B. Special provision for
safeguarding the interest of the
employee.- (1) Notwithstanding
anything to the contrary contained
elsewhere in this Act or in any
other law for the time being in
force, where an undertaking is sold
under Section 5 or Section 6, any
amount that may be due on account
of salary or wages, leave-salary or
leave wages, bonus, gratuity,
retrenchment compensation,
contribution to provident fund or
on similar or other account from
the licensee to the employee
employed in the affairs of the
undertaking on the date of
completion of the sale or on the
date on which the undertaking is
delivered to the intending
purchaser under sub-section (3) of
Section 5 or sub-section (6) of
Section 6, as the case may be,
whichever is earlier, shall be
deemed to be a debt due to the
employee.
(2) The debt referred to in sub
section (1) shall, on adjustment
of the amount, if any, due from the
employee to the licensee on the
date referred to in sub-section
(1), have preference to all other
debts and obligations except
mortgage, and shall be payable out
of the purchase price after
deduction therefrom of the amount
that may be due from the licensee
under mortgage, if any.
(3) If, however, the purchase
price, after deduction therefrom of
the amount that may be due under
mortgage, if any, falls short,
wholly or in part, of the debt due
on adjustment to the employee, the
purchaser or the intending
purchaser, as the case may be,
shall be liable to pay such debt
due to the employee to the extent
of such shortage.
(11) The provisions of this section
shall also apply to an undertaking
which has been sold under Section 5
or Section 6 but the sale has not
been completed prior to the date of
commencement of the Indian
Electricity (West Bengal Amendment)
Act, 1980.
Provided that the sale of the
undertaking shall not be deemed to
be completed if the purchase price,
if payable after deducting the
claim of the employees of the
licensee from the consideration
money, has not been paid to the
licensee in full and final
settlement of the claim."
The effect of sub-section (1) of Section 7B is to protect the dues on account of salary, wages, leave-salary or leave wages, bonus, gratuity, retrenchment compensation, contribution to general provident fund, etc. to be a debt due to the employee. That means such debt shall attach to the purchase money which was paid by the Board for the undertaking of the Company. But eh undertaking shall vest in the Board free from any debt, mortgage or similar obligation under Section 7 of the Act. In other words, if the purchase price paid by the Board is sufficiently large to pay the claims of the workmen, then the dues of the workmen should be paid out of the purchase money. It is not the case of the workmen here that money paid by the Board was not sufficient to pay the erstwhile employees of the Company. Therefore, in the facts of this case, it cannot be said that the Board has any liability to pay the workmen any amount on account of retrenchment compensation.
On behalf of the employees, our attention was drawn to Section 25FF of the Industrial Disputes Act, which provides:-
"25FF, Compensation to workmen in
case of transfer of undertakings.-
Where the ownership or management
of an undertaking is transferred,
whether by agreement or by
operation of law, from the employer
in relation to or that undertaking
to a 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 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 such transfer 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 been interrupted
by the transfer."
This section declares the right of the workman, who has been in continuous service for not less than one year in an undertaking, to notice and compensation in accordance with the provisions of Section 25F in a case where the ownership and management of an undertaking is transferred by agreement or operation of law to a new employer. In such a case, by legal fiction, the workman is treated as if he had been retrenched. The provision to Section 25FF lays down that nothing in Section 25FF will apply to a workman where there has been a change of employer by reason of the transfer of the undertaking if three conditions laid down in the provision are fulfilled. The three conditions are:
(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 such transfer 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 been interrupted
by the transfer."
None of these conditions has been fulfilled in this case. The service of the workmen has been interrupted. Fresh employment has been offered by the transferee. The workmen, who had previously been permanently employed, were offered temporary employment by the Board. The workmen accepted the offer. There is no legal obligation cast upon the Board under the terms or the transfer or otherwise to pay any retrenchment compensation to the workmen. Therefore, the employees have no right under Section 25FF to claim any compensation from the Board. Nor do they have any right to claim to be in continuous employment on same terms and conditions, even after the purchase of the undertaking by the Board. The High Court in appeal was right in holding that the employees were entitled to retrenchment compensation under the provisions of Section 25FF. But the High Court was in error in holding that the Board even after payment of the purchase price to the transferor-Company was liable to pay retrenchment compensation tot he employees. The assertion of the Board that the purchase money was more than adequate to pay retrenchment compensation to the employees has not been denied.
In view of the aforesaid, we allow Civil Appeal No.10220 of 1995, preferred by the Board, and dismiss Civil Appeal No.10219 of 1995, preferred by the employees. There will be no order as to costs in both these appeals.